Analysts say this year's lower tax refunds are largely to blame for a sizable drop in retail spending in the first quarter.

UBS says its initial estimate of tax refunds received this season was too optimistic by a whopping $25 billion.

For the median family's refund amounted to more than three weeks' pay last year, JP Morgan Chase found.

The refund shortfall comes at an awkward time—just as the economy is already cooling off after last year's tax-cut-fueled spending jump.

The smaller number of tax refunds this year is showing up in another way: Lower retail spending. Retail sales dropped from January to February, surprising economists who had expected a modest rise as seen in past years. Indeed, excluding car purchases and gas (whose price has been rising), February's retail sales were 0.6 percent below January's.

Analysts say that lower tax refunds are largely to blame for the drop in spending, since many families use refunds as a "mandatory saving" mechanism that pays out each year come tax time. For the median family receiving a refund, it amounts to more than three weeks' pay, a JPMorgan Chase study found last year. In the weeks after a refund is received, families spend more on large purchases such as furniture or appliances; credit-card payments and travel, the study found.

So far this year, the Treasury has issued $4.4 billion less in tax refunds than this time last year, according to the latest IRS data. The number of tax refunds issued is down by 1.9 million. That's partly because many taxpayers were slower to file and partly because fewer are eligible for a refund this year. And lower refunds means less spending money.

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UBS revised its estimate of tax refunds received in this tax season, writing that its initial guess was too optimistic by a whopping $25 billion.

"We now expect the shortfall in the first phase of tax season, driven by smaller refunds, to be $25 [billion] below our initial forecast," UBS analysts wrote in a note. "[W]e attribute much of the decline in February retail sales to the pattern of this year's refunds."

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The level of refunds, of course, says nothing about the amount of tax Americans paid last year, which is expected to have dropped from the year before and increase the typical worker's take-home pay week in and week out. "Nonetheless, refunds influence the timing of household spending," UBS wrote. "A substantial shortfall in net payments to households would reduce consumption in 2019."

Goldman Sachs agreed, writing in a note that "the delay in tax refunds likely contributed" to weak February retail sales.

The refund shortfall is coming at an awkward time—just as the economy is already cooling off after a tax-cut-fueled spending jump. The pace of spending, measured in core retail sales, has been gradually slowing since July.

"Stepping back from the monthly noise, it's very clear that the rate of growth of retail sales has stepped down since last fall, but that was inevitable as the impact of the tax cuts and the drop in gas prices faded," Pantheon Macroeconomics wrote in a note.

On the other hand, lower spending now creates the potential for higher spending later in the year, Goldman noted.